GFL Strand 4, Standard 3: Risks and Returns of Investing

What is the primary purpose of investing?

• To grow your wealth over time by taking calculated risks.

• To avoid spending money on everyday needs.

• To ensure your money is never at risk.

• To keep your money in cash for emergencies.

What is an example of a long-term investment?

• A 401(k) retirement account.

• A savings account for monthly bills.

• A loan for a new car.

• A short-term certificate of deposit (CD).

What is an IRA?

• An Individual Retirement Account used to save for retirement.

• A savings account that earns high monthly interest.

• A checking account for paying daily expenses.

• A loan used to purchase a home.

What is the difference between a Roth IRA and a traditional IRA?

• Roth IRAs are funded with after-tax dollars, and withdrawals are tax-free.

• Roth IRAs have higher interest rates than traditional IRAs.

• Traditional IRAs are only available through employers.

• Traditional IRAs do not have contribution limits.

What is a mutual fund?

• A pool of money from many investors used to buy a variety of stocks and bonds.

• A single stock that offers the highest return.

• A high-risk account with guaranteed profits.

• A personal loan taken out to buy assets.

What is the purpose of dividend reinvestment?

• To use earned dividends to purchase more shares of the same stock.

• To save dividends for daily expenses.

• To guarantee higher returns on investments.

• To avoid paying taxes on dividends.

What is one benefit of a 401(k) plan?

• Employers often match a portion of your contributions.

• It allows unlimited contributions each year.

• Withdrawals are always tax-free.

• It is only available to self-employed individuals.

What are stocks?

• Shares of ownership in a company.

• Loans given to the government or corporations.

• A type of savings account with guaranteed returns.

• Assets that cannot be traded or sold.

What are bonds?

• Loans investors give to a government or corporation in exchange for interest payments.

• Ownership shares in a company.

• High-risk investments in real estate.

• Savings accounts with fixed interest rates.

What is the relationship between risk and return?

• Higher risk often comes with the potential for higher returns.

• Lower risk always guarantees higher returns.

• Risk and return are not related.

• Higher risk means you never earn any returns.